It’s very common to wonder what to do with your 401K when you’re switching from one job to another, or as is the case for so many during COVID-19 – when you’ve unfortunately lost your job.  Let’s discuss the 4 general options that you should consider.


Leave it where it is.  There are 401K administrators that will allow you to leave your account as is.  This would be considered the path of least resistance as you literally don’t have to touch it.  However, this isn’t necessarily the best option.  If you plan on continuing to work, you can no longer contribute to the old 401K as your contributions can only come from your paycheck provided by your current employer. So essentially the funds in your old 401K would just end up sitting there.  Depending on what stage of your career that you’re in, it’s very possible that you will switch jobs a number of times.  If you leave your 401K with each previous employer, you will end up with several different 401Ks, which can be hard to manage, and makes for poor planning.


Transfer the money.  If you have a new employer, it is very likely that you are allowed to transfer your old 401K into your new employer’s 401K plan.  This allows you to consolidate your 401Ks, have all of the money in one place, and continue to contribute. This approach makes it a lot easier to track and manage your account.


Open up an IRA at the institution of your choice, and roll the money over.  In this scenario it is best to do a direct transfer from the 401K to the IRA, so that the money never touches your hands. This helps to prevent the triggering of a taxable event, paying unwanted fees, or feeling the temptation to spend any of the money.

There is also the option of rolling the funds over into a Roth IRA.  Keep in mind that you will have to pay taxes on this type of conversion.  If you’re going to be in a lower tax bracket at the time of the rollover, this could be a good option for you.  Your best bet is to consult with a Certified Financial Planner™ Professional in this case, in order to obtain the appropriate guidance.  I talk about this in much greater detail in episode 25, so be sure to check it out.


Take the money out. Please keep in mind that by doing so, you will have to pay income tax on the distribution.  If you are under the age of 59 ½, there is an additional 10% penalty that you will have to pay.  There are some exceptions including disability and circumstances related to COVID-19. I discuss some of the COVID-19 related guidelines in episode 24 of my podcast, so be sure to tune in.


Now!  Some people are under the assumption that you have to be rich to have a financial planner.  There are others who believe they only need to speak with a financial planner if they’re having a serious financial issue.  Neither is true.  Regardless of your economic situation, a financial planner can help you in truly significant ways.  Whether you have a lot of money, a little bit of money, a lot of debt, no debt, unsure about your employer’s 401K options, or any other money related issue, a financial planner can help you navigate through all of these things and put you on the road to achieving your financial goals.  Even if you feel very stable with your finances, a financial planner can help you sustain the progress you’ve already made.


Listen to the On My Way To Wealth Podcast for additional information and specific examples. Want to receive my e-book with free money tips for Gen Xers? Click this link:  Consult with a Certified Financial Planner™ professional as he/she can provide you with the knowledge and expertise critical to help you Build A Better Financial Future!


As always, thank you for checking out my podcast and blog post!  If there are any topics you would like to learn more about, or if you would like to schedule a free financial consultation with me, please email me at!  All of my podcast episodes can be found at and on all major podcasting platforms.  For my business site, please be sure to check out  I look forward to helping you Build A Better Financial Future!